Activision Blizzard: These Catalysts Could Lead to Stock Multiple Expansion

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.  

Activision (NASDAQ:ATVI) Q4 beat driven by  Call of Duty and Skylanders.  Revenue was $2.60 billion, compared with our estimate of $2.45 billion, consensus of $2.44 billion, and guidance of $2.41 billion. EPS was $0.78, compared with our estimate of $0.72, consensus of $0.72, and guidance of $0.70.

Activision delivered yet another year of solid growth. Once again, Activision delivered both top and bottom line growth, as Call of Duty Black Ops II sales were relatively flat compared to Modern Warfare 3 sales last year. Growth came from the outstanding performance of Skylanders Giants, with particularly strong sales of toys. Blizzard seems to have stabilized its World of Warcraft subscriber base, and upside from Blizzard allowed Activision to again achieve record sales and earnings.

Management provided conservative FY guidance for revenue of $4.175 billion and EPS of $0.80. Full year guidance assumes a significant drop-off for Blizzard revenue, with two releases in 2013 (the first  StarCraft II expansion and an unnamed title) expected to underperform 2012’s Diablo III and Mists of Pandaria. In addition, the company expects Call of Duty sales to decline.  Guidance does not include…